Friday, January 4

'Opportunity for monetisation of captive BPOs in 18 months'

The captive BPO as a model may be under a cloud, but there could be a window of opportunity for parent companies in divesting them particularly in the BFSI space. According to a study by TPI, a sourcing advisory firm, there is a window of opportunity for monetisation of captive units in the next 18 months. Acquisitions of these captives could be triggered by the global race of large service providers to achieve scale, it adds.

This window of opportunity could be restricted to half-a-dozen financial services captives in India that have grown in scale with several thousand employees. So, the financial services captives would perhaps continue the tradition of being the most attractive.

Citibank BPO and Aviva are the latest ones that are on the block while successful selloff in the past include GECIS, former GE captive. Offshoring trends trackers say, once they achieve scale and standardise all systems and processes, most captive entities face the challenge of people retention and also the fact that there may not be any new milestones for the centre on the strategy front.

“That is when most captives either turn into third party service providers or walk the selloff ramp,” says a tracker. Scope, Standard Chartered BPO, is now looking at providing third party services.

Another angle to the selloff story of captives is that the parent company gets an opportunity to completely get back the return on investment on an offshore centre. While no company starts a captive centre with selloff in mind, many may actually factor that opportunity while going offshore, they add.

At the same time, the buyers of these captives get trained people and a steady stream of revenue. It also gives them the opportunity for them to tap into other clients using the platform of the captives.

There has been a growing debate about the viability of captives as some state that merely operating it as a cost centre takes the operations nowhere and hence the move to exit. There are others who feel that there is enough room for growth to these captives.

However, this does not mean that most BFSI captives would be looking at selling their operations as they would like to keep certain strategic and core functions within themselves. A classic case has been about Deutsche Bank, which has significantly scaled up its operations, not doing just regular backend work but also certain high-end activity.

At the same time, the growing financial services market in India will see the MNC financial institutions expanding its captives into specialised activities like equity research, statistical modelling and derivative services. An example of this is Lehman Brothers with its captive centre in Mumbai providing high-end services.

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